Let’s take a look at results from the industry.
Ford
Valuentum’s Best Ideas Newsletter holding Ford Motor Company (NYSE:F) posted a spectacular May, exceeding consensus estimates with unit sales surging 14% year-over-year to 246,585. As we hit home in our recent piece about the US housing recovery, pickup sales are driving a large portion of Ford’s gains. In fact, F-Series unit sales grew 31% year-over-year to 71,604 units! Other cars posting large sales included the Escape, up 26% year-over-year; the Fusion, up 10% year-over-year; and the Explorer, up 15% year-over-year. Both the Escape and Fusion posted their best Mays ever, with both coming in a shade under 30,000 units.
Lincoln continues to fare poorly, with unit sales up just 0.5% year-over-year (compared to 14.5% for Ford Motor Company (NYSE:F)brand). The MKZ grew 42% year-over-year, but its scope remains limited, and the rest of Lincoln continues to be weak.
Unfortunately the wonderful sales data was tarnished by the announcement of a 465,000 vehicle recall. This looks mostly cautionary, in our view, which Ford admitted. From the press release:
“While a fuel leak in the presence of an ignition source may result in a fire, there have been no reports of fires (and) we are not aware of any accidents or injuries attributed to this condition.”
We, at Valuentum, doubt the recall will have any material impact on the company, and competitor Toyota Motor Corporation (ADR) (NYSE:TM) has survived several recalls during the past few years with little impact on its reputation. We continue to hold shares of Ford Motor Company (NYSE:F) in the portfolio of our Best Ideas Newsletter, and we see upside over $20 per share.
General Motors
Although we think General Motors Company (NYSE:GM)’s product lineup is a bit weaker than Ford’s product lineup, the company’s sales still grew 3% year-over-year during May to 252,894 units. Chevrolet, in particular, has a hard time keeping pace with Ford Motor Company (NYSE:F), as sales increased just 0.9% year-over-year in May. Volt sales were again sluggish, registering just 1,607 units, a decrease of 4% year-over-year. Still, the company’s SUV and truck lineup registered very solid growth, led by a ‘construction-driven’ 25% increase in Silverado sales, a 29% increase in Tahoe unit sales, and a 13% increase in Equinox sales.
On the other hand, Cadillac is doing a fantastic job with the introduction of its new ATS and XTS models. Total sales for the segment increased 40% year-over-year to 13,808 units, with additional strength provided from sales of Escalades. Even if the company is having a hard time competing for dollars in Middle America, the firm’s flagship luxury brand remains a serious force in a highly competitive market.
In addition to posting decent sales numbers, General Motors Company (NYSE:GM) was named to replace H.J. Heinz Company (NYSE:HNZ) in the S&P 500. (Regulators have now approved Warren Buffett’s-led takeover, taking H.J. Heinz Company (NYSE:HNZ) private.) Marginal dollars thrown at the name for inclusion in the index will likely give the firm a short-term boost, but we think it’s more significant in the sense that it signals the company’s return to feasible enterprise. We think shares could see some additional upside from current levels, but we aren’t rushing into the company at this price.
Toyota
Toyota Motor Corporation (ADR) (NYSE:TM) continues to capitalize on the weak yen and sell a lot of cars in the US—207,952 of them (up 2.5% year-over-year). The firm continues to claim the top spot in retail sales, and we think investors should remember the company manages inventory slightly differently than General Motors Company (NYSE:GM) and Ford, so its product sales growth should lag other companies.
Regardless, the company’s core Toyota Motor Corporation (ADR) (NYSE:TM) brand remains solid, but we think sales of the Corolla (down 12% year-over-year) and Camry (down 0.9% year-over-year) are losing some share to the redesigned Focus and Fusion. Sales of 27,977 units and 39,216 units, respectively, are nothing to scoff at, and the firm’s customer base remains loyal and relatively sticky, in our view. Pickup truck sales were also strong, growing 18% compared to a year ago to a shade under 25,000 units. Though a good figure, we have little doubt that the F-Series is taking share from all of its competitors.
Still, we were a bit more impressed with growth at Lexus, where sales were 29% higher than a year ago at 12,422 units. Sales of the ES and LS more than doubled, and we think the Lexus consumer (perhaps more practical than Audi/BMW/Mercedes) is becoming more confident due to the rising tide of the housing and equity markets.
With the weak yen, Toyota Motor Corporation (ADR) (NYSE:TM) has a compelling price advantage, and we think shares are worth $135 each. However, return potential from current levels simply isn’t great enough to warrant a position in the portfolio of our Best Ideas Newsletter.
Honda
Honda Motor Co Ltd (NYSE:HMC) posted a solid month, with sales growing 4.5% year-over-year to 140,013 units. No doubt, the growth is lagging some of its competitors such as Ford Motor Company (NYSE:F) and Chrysler, but the growth rate was stronger than both General Motors Company (NYSE:GM) and Toyota Motor Corporation (ADR) (NYSE:TM). As with Toyota Motor Corporation (ADR) (NYSE:TM), the company didn’t experience much inventory building, so most of the sales were at the retail level. As American EVP of Sales John Mendel noted on the press release:
“Looks like American families are preparing for summer road trips as our family-friendly light truck lineup posted the best May sales in Honda Motor Co Ltd (NYSE:HMC) history. Virtually every Honda vehicle we sold in May represents a purchase by an individual customer, which means Accord, Civic, CR-V and Odyssey will maintain their industry-leading retail sales performance in 2013.”
Sales of the Accord were wonderful, growing 12% year-over-year to 33,218 units, though the other hot seller, the Civic, wasn’t as strong, with sales falling 9% year-over-year to 30,268 units. Like management noted, light truck sales were strong, with the Odyssey, Pilot, and CR-V all posting strong sales gains. Sales of the Ridgeline pickup benefitted from the housing strength, growing 36% year-over-year—but those sales totaled just 1,626 units.
Acura sales weren’t great, falling 1.5% in total, though cars (up 4% year-over-year) outpaced trucks (down 6% year-over-year). It is no secret how competitive the US luxury market has become, especially with players like Audi and Mercedes rolling out cars at lower price points. Nevertheless, the company’s low-end ILX model (pictured above) appears to be a hit, and we think this price range could accelerate as youth unemployment falls and more consumers flock to “affordable” luxury. Still, Honda Motor Co Ltd (NYSE:HMC) is fairly valued at this time.
Best of the rest
Fiat target Chrysler experienced 11% year-over-year unit sales growth to 166,596. Standouts included the Ram, which was up 22%, and strong contributions from the Avenger, Fiat 500, and the Challenger. Volkswagen was unable to match its pace from 2012, and sales declined 1.7% year-over-year. Beetle sales were strong thanks to a new convertible model, up 79% compared to the prior year, but the Jetta experienced a mild decline and the Passat only grew sales 1% year-over-year.
BMW’s North American sales were relatively strong, growing 10% year-over-year to 31,174 units. Growth was largely driven by the low-end 3-series, where sales climbed 47% compared to the prior year. Interestingly, motorcycle sales were up 61% year-over-year. Competitor Mercedes also rode strong tailwinds to strong May sales, which increased 8% year-over-year. Where was the strength? Not surprisingly, the low-end C-Class sales surged 20%.
Valuentum’s position
We’re still huge fans of the valuation upside offered by Ford ($20+). The firm remains a core holding in the portfolio of our Best Ideas Newsletter.
RJ Towner owns shares of Ford. Valuentum holds shares of Ford in the portfolio of its Best Ideas Newsletter. The Motley Fool recommends Ford and General Motors Company (NYSE:GM). The Motley Fool owns shares of Ford Motor Company (NYSE:F).
The article The US Auto Recovery Is Unshakeable originally appeared on Fool.com.
RJ is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
